Affordability Surge: India’s Real Estate Market Positioned for Growth in 2024
In the International Monetary Fund’s (IMF) annual Article IV consultation with India, the organisation described the Indian economy as a ‘star performer’, projected to contribute 16% to global growth in 2023. Amidst global headwinds, the Indian economy has continued to be one of the fastest-growing, standing headfast in a time of global wars, recessions, shifting supply chains, and international socio-political upheaval.
While the country was not fully shielded from the global turbulence in 2023, with ameliorating domestic inflation levels and the country’s growth outpacing the rest of the world, the Indian Central Bank was able to maintain a relatively stable repo rate. This resulted in residential sales in the first nine months of 2023 surpassing 90% of the yearly sales of the previous year.
It comes as no surprise then that, according to a report by a leading real estate services company, home affordability is expected to improve even further in 2024, with the repo rate projected to be cut by 60–80 bps. This is forecast to not only lead to keeping residential properties within a comfortably affordable bracket but is also likely to keep the positive momentum of sales going.
While there has been quite a bit of a rise in the price of residential properties, it has not yet acted as an inhibitor of affordability or increasing levels of sales. This is simply because of the sustained economic growth of the country, which has resulted in better employment opportunities and rising per capita income, leading to better affordability even when compared to pre-COVID times.
This is quite a contrast from the year 2022, when home affordability levels declined quite a bit, as opposed to the year 2021, when they reached their peak level in a decade. This was a result of the RBI raising the repo rate by 225 bps from May until December 2022.
The aforementioned report also revealed Kolkata, Pune, and Hyderabad as the most affordable of the 7 prime cities in India, with Kolkata retaining its spot as the most economically viable for investing in residential assets. Further, the city is also predicted to witness the highest sales in this sector in both 2023 and 2024. Pune and Hyderabad are likely to follow with higher affordability gauged for the year 2024, with the residential market anticipated to boom in the cities.
If the current cycle advances as per the experts’ predictions, then the year 2024 is likely to be one of the most affordable and lucrative years to invest in residential projects in India, second only to 2021. The year 2024 therefore presents a promising window for residential investments in India. With rising affordability, stable repo rates, and anticipated sales growth, the real estate sector emerges as a beacon of opportunity amid global uncertainties.
